1-800-FLOWERS.COM, Inc. Reports Revenues From Continuing Operations of $235.4 Million, EBITDA(1) of $30.4 Million and Earnings Per Share of $0.21 For Its Fiscal 2011 Second Quarter

1-800-FLOWERS.COM, Inc. (NASDAQ: FLWS), the world’s leading florist and gift shop, today reported revenues from continuing operations of $235.4 million for its fiscal 2011 second quarter ended December 26, 2010, compared with revenues from continuing operations of $238.5 million in the prior year period. The Company said the 1.3 percent decline reflected reduced wholesale order volume in the mass market channel as well as the loss of approximately $1.4 million of high-margin revenues associated with a third-party marketing program which the Company ended in December of 2009.

Gross profit margin for the quarter improved 20 basis points to 42.0 percent compared with 41.8 percent in the prior year period. This improvement was attributed to reduced promotional activities and enhanced manufacturing efficiencies which more than offset commodity price increases. Operating expenses (excluding depreciation and amortization) decreased $2.7 million to $68.5 million, compared with $71.2 million in the prior year period.

EBITDA from continuing operations for the quarter increased 6.6 percent, or $1.9 million, to $30.4 million compared with EBITDA of $28.5 million in the prior year period. This year-over-year increase was achieved despite the fact that the prior year period included approximately $1.4 million in EBITDA associated with the aforementioned discontinued third-party marketing program. Net income from continuing operations increased 6.3 percent, or approximately $800,000, to $13.5 million, or $0.21 per share, compared with net income from continuing operations of $12.7 million, or $0.20 per share, in the prior year period.

Jim McCann, CEO of 1-800-FLOWERS.COM, said, "During the fiscal second quarter, we made substantial progress on the initiatives we have outlined for fiscal 2011. We improved our gross profit margin through a combination of manufacturing efficiencies in our Gourmet Food and Gift Baskets businesses and more efficient use of promotions in our Consumer Floral category. Gross margin is an area of ongoing focus and we expect further improvements during the second half of our fiscal year. We also reduced operating expenses across the entire enterprise. As a result, we were able to deliver solid bottom-line results for the quarter.”

McCann said that revenues for the quarter, though down slightly, were in line with the Company’s expectations and reflected several factors: "In our Gourmet Food and Gift Basket product lines, we saw strong ecommerce growth, particularly in our 1-800-Baskets.com brand. This growth helped to largely offset the lower wholesale basket demand in the mass market channel that we talked about prior to the start of the quarter.

"In addition, we saw continued growth in our BloomNet business, where our exclusive relationship with Yankee Candle, among other new product and service initiatives, has been well received by our florists. Importantly, we were pleased with the improving revenue trend in our Consumer Floral business which, adjusted for the loss of revenues associated with the discontinued third-party marketing program, was down approximately 2.7 percent compared with the prior year period. We believe we are on track to achieving our stated objectives for this category: to improve the sales trend, increase gross profit margin and enhance category contribution,” said McCann.

McCann also noted that, during the second quarter, the Company continued to build on its industry-leading reputation for superior customer service. "We are very proud to have been named by the E-Tailing Group as one of only nine online retailers out of 100 benchmarked to meet the criteria for Excellence in Online Customer Service*. Our efforts in this area are expanding and we expect further enhancements to our industry leading customer service going forward,” he said.
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During the fiscal second quarter, the Company attracted 653,000 new customers, of whom 79 percent, or 517,000, came to the Company through its online channels. Approximately 1.7 million customers placed orders during the quarter, of whom 61 percent were repeat customers. This reflects the Company’s successful efforts to engage with its customers and deepen its relationships as their trusted Florist and Gift Shop for all of their celebratory occasions.

CATEGORY RESULTS FROM CONTINUING OPERATIONS:

The Company provides selected financial results for its Consumer Floral, BloomNet and Gourmet Foods & Gift Baskets business categories in the tables attached to this release and as follows:

• 1-800-FLOWERS.COM Consumer Floral: During the fiscal 2011 second quarter, revenues in this category were $82.6 million compared with $85.9 million in the prior year period. Gross margin for the quarter increased 30 basis points to 38.6 percent compared with 38.3 percent in last year’s second quarter. Category contribution margin was $8.2 million compared with $7.6 million in the prior year period. This year-over-year increase was achieved despite the fact that the prior year period included approximately $1.0 million in category contribution associated with the aforementioned discontinued third-party marketing program. (The Company defines Category contribution margin as earnings before interest, taxes, depreciation and amortization and before allocation of corporate overhead expenses.)
• BloomNet Wire Service: Revenues were $16.2 million, compared with $14.8 million in the prior year period, primarily reflecting increased wholesale product sales. Gross margin for the quarter was 56.0 percent compared with 58.1 percent in the prior year period, primarily the result of product mix. Category contribution margin was $5.4 million compared with $4.7 million in the prior year period.
• Gourmet Food and Gift Baskets: Revenues were $136.7 million, compared with $138.2 million, reflecting reduced wholesale orders from mass market customers largely offset by strong growth in 1-800-Baskets.com and Cheryl’s ecommerce channels. Gross margin increased 10 basis points to 42.2 percent compared with 42.1 percent. Category contribution margin was $28.7 million compared with $28.6 million in the prior year period. This year-over-year increase was achieved despite the fact the prior year period included approximately $400,000 in category contribution associated with the aforementioned discontinued third-party marketing program as well as much stronger wholesale order volume in the mass market channel.

Company Guidance:

The Company does not provide specific guidance for revenues, EPS, EBITDA and free cash flow. Regarding its current fiscal third quarter, which is largely floral in nature due to the Valentine holiday, the Company said that it will continue to focus on enhancing gross profit and contribution margins in its Consumer Floral business.

"Historically, the Monday placement for the Valentine holiday has had a significant negative effect on floral sales. As a result, we anticipate that topline will be impacted. With that said, we will continue to execute on our initiatives to enhance the effectiveness of our marketing programs. We believe these efforts will enable us to deliver year-over-year improvement in our consumer floral gross profit margins and bottom-line contribution in the current third quarter and overall for the second half of our fiscal year,” said McCann.

"Also during the second half, we anticipate that BloomNet will continue to grow its market share and generate solid profitability while our Gourmet Food and Gift Baskets product lines will continue to perform well, albeit at seasonally lower levels,” said McCann.

Definitions:

EBITDA: Net income (loss) before interest, taxes, depreciation, amortization. Free Cash Flow: net cash provided by operating activities less capital expenditures. The Company presents EBITDA and Free Cash Flow because it considers such information a meaningful supplemental measure of its performance and believes these metrics are frequently used by the investment community in the evaluation of the Company’s performance and that of similarly situated companies. The Company also uses EBITDA as one of the factors used to determine the total amount of incentive compensation available to be awarded to executive officers and other employees. The Company’s credit agreement uses EBITDA to measure compliance with covenants such as interest coverage and debt incurrence. EBITDA is also used by the Company to evaluate and price potential acquisition candidates. EBITDA and Free Cash Flow have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP. Some of the limitations of EBITDA are: (a) EBITDA does not reflect changes in, or cash requirements for, the Company's working capital needs; (b) EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on the Company's debts; and (c) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future and EBITDA does not reflect any cash requirements for such capital expenditures. EBITDA and Free Cash Flow should only be used on a supplemental basis combined with GAAP results when evaluating the Company's performance.

About 1-800-FLOWERS.COM, Inc.

1-800-FLOWERS.COM, Inc. is the world’s leading florist and gift shop. For more than 30 years, 1-800-FLOWERS® (1-800-356-9377 or www.1800flowers.com) has been helping deliver smiles for our customers with gifts for every occasion, including fresh flowers and the finest selection of plants, gift baskets, gourmet foods, confections, candles, balloons and plush stuffed animals. As always, our 100% Smile Guarantee backs every gift. 1-800-FLOWERS.COM’s Mobile Flower & Gift Center was named winner of the 2010 "Best Mobile App for E-commerce” by DPAC (Digiday’s Publishing & Advertising Awards) and RIS (Retail Info Systems) 2010 Mobile App of the Year Award in the "Best Shopping” category. 1-800-FLOWERS.COM was also rated number one vs. competitors for customer satisfaction by STELLAService and named by the E-Tailing Group as one of only nine online retailers out of 100 benchmarked to meet the criteria for Excellence in Online Customer Service. 1-800-FLOWERS.COM has been honored in Internet Retailer’s "Hot 100: America’s Best Retail Web Sites” for 2011. The Company’s BloomNet® international floral wire service (www.mybloomnet.net) provides a broad range of quality products and value-added services designed to help professional florists grow their businesses profitably. The 1-800-FLOWERS.COM, Inc. "Gift Shop” also includes gourmet gifts such as popcorn and specialty treats from The Popcorn Factory® (1-800-541-2676 or www.thepopcornfactory.com); cookies and baked gifts from Cheryl’s® (1-800-443-8124 or www.cheryls.com); premium chocolates and confections from Fannie May® confections brands (www.fanniemay.com and www.harrylondon.com); gift baskets and towers from 1-800-Baskets.com® (www.1800baskets.com); and wine gifts from Winetasting.com® (www.winetasting.com). The Company’s Celebrations® brand (www.celebrations.com) is a new premier online destination for fabulous party ideas and planning tips. 1-800-FLOWERS.COM, Inc. is involved in a broad range of corporate social responsibility initiatives including continuous expansion and enhancement of its environmentally-friendly "green” programs as well as various philanthropic and charitable efforts. Shares in 1-800-FLOWERS.COM, Inc. are traded on the NASDAQ Global Select Market, ticker symbol: FLWS.

Special Note Regarding Forward-Looking Statements:

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent the Company’s current expectations or beliefs concerning future events and can generally be identified by the use of statements that include words such as "estimate,” "project,” "believe,” "anticipate,” "intend,” "plan,” "foresee,” "likely,” "will,” "goal,” "target” or similar words or phrases. Forward-looking statements include, but are not limited to, statements regarding the Company’s expectations for: improved gross profit margin and enhanced bottom line results for its Consumer Floral category and on a consolidated basis for the fiscal third quarter and second half of fiscal 2011 compared with the prior year and continued market share growth and solid profitability in its BloomNet wire service business. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of the Company’s control, that could cause actual results to differ materially from the results expressed or implied in the forward-looking statements, including, among others: the Company’s ability to leverage its operating platform and reduce operating expenses; its ability to grow its 1-800-Baskets.com business; its ability to manage the increased seasonality of its businesses; its ability to cost effectively acquire and retain customers; the outcome of contingencies, including legal proceedings in the normal course of business; its ability to compete against existing and new competitors; its ability to manage expenses associated with sales and marketing and necessary general and administrative and technology investments; its ability to reduce promotional activities and achieve more efficient marketing programs; and general consumer sentiment and economic conditions that may affect levels of discretionary customer purchases of the Company’s products. The Company undertakes no obligation to publicly update any of the forward-looking statements, whether as a result of new information, future events or otherwise, made in this release or in any of its SEC filings except as may be otherwise stated by the Company. For a more detailed description of these and other risk factors, please refer to the Company’s SEC filings including the Company’s Annual Reports on Form 10-K and its Quarterly Reports on Form 10-Q. Consequently, you should not consider any such list to be a complete set of all potential risks and uncertainties.

Conference Call:

The Company will conduct a conference call to discuss the above details and attached financial results today, Thursday, January 27, 2011 at 11:00 a.m. (EST). The call will be "web cast” live via the Internet and can be accessed from the Investor Relations section of the 1-800-FLOWERS.COM web site at www.1800flowersinc.com A recording of the call will be posted on the Investor Relations section of the Company’s web site within two hours of the call’s completion. A replay of the call can be accessed via telephone for one week beginning at 2:00 p.m. (EST) on 1/27/10 at: 1-800-642-1687 (domestic) or 1-706-645-9291 (international). Enter replay pass code #: 36606087.

[Note: Attached tables are an integral part of this press release without which the information presented in this press release should be considered incomplete.]

(*) During the second quarter of fiscal 2010 the Company launched the 1-800-Baskets.com brand which is included within the results of the Gourmet Food & Gift Baskets category. Prior period results, which had previously been included within the 1-800-Flowers Consumer Floral category, have been reclassified accordingly.

(**) Corporate expenses consist of the Company’s enterprise shared service cost centers, and include, among other items, Information Technology, Human Resources, Accounting and Finance, Legal, Executive and Customer Service Center functions, as well as Share-Based Compensation. In order to leverage the Company’s infrastructure, these functions are operated under a centralized management platform, providing support services throughout the organization. The costs of these functions, other than those of the Customer Service Center, which are allocated directly to the above categories based upon usage, are included within corporate expenses as they are not directly allocable to a specific category.

(***) Performance is measured based on category contribution margin or category Adjusted EBITDA, reflecting only the direct controllable revenue and operating expenses of the categories. As such, management’s measure of profitability for these categories does not include the effect of corporate overhead, described above, depreciation and amortization, other income (net), nor does it include one-time charges. Management utilizes EBITDA, and adjusted financial information, as a performance measurement tool because it considers such information a meaningful supplemental measure of its performance and believes it is frequently used by the investment community in the evaluation of companies with comparable market capitalization. The Company also uses EBITDA and adjusted financial information as one of the factors used to determine the total amount of bonuses available to be awarded to executive officers and other employees. The Company’s credit agreement uses EBITDA and adjusted financial information to measure compliance with covenants such as interest coverage and debt incurrence. EBITDA and adjusted financial information is also used by the Company to evaluate and price potential acquisition candidates. EBITDA and adjusted financial information have limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP. Some of these limitations are: (a) EBITDA does not reflect changes in, or cash requirements for, the Company's working capital needs; (b) EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on the Company's debts; and (c) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and EBITDA does not reflect any cash requirements for such capital expenditures. Because of these limitations, EBITDA should only be used on a supplemental basis combined with GAAP results when evaluating the Company's performance.